As Britons trudge to the polls on Thursday, they do so knowing that none of the men who aspire to be the next prime minister have been fully honest with the electorate about the horrors of Britain’s looming fiscal crisis. The country may have decided that the country needs change, but it’s also afraid of that change and the austerity it will demand. Unless the polls are wrong, it seems that David Cameron will be asked to clean up the mess. It is not an enviable task.
The new government is going to be in hock to the bond market as London demands urgent action on both Britain’s ballooning fiscal deficit and a national debt that, on current forecasts, will reach an eye-watering £1.4 trillion (about $2.1 trillion) by the end of the next parliament. Simply servicing that debt could cost £80 billion a year—or roughly half the current annual deficit, which, this year, amounts to fully 12 percent of GDP…
The new government, whatever its constitution, won’t have the luxury of a honeymoon. Senior Tories warn that the new government must seize the initiative immediately, setting out plans for immediate and longer-term spending cuts within weeks in order to reassure the bond market.
George Osborne, the likely new Chancellor of the Exchequer, will introduce an emergency budget within 50 days, spelling out at least £6 billion in immediate cuts before conducting a government-wide spending review in the autumn that will produce a template for further reductions in the years to come. But even Conservatives admit that their plans are fluid and that announced measures, such as a pay freeze for 80 percent of government workers, do not go nearly far enough.
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